Court File and Parties
DIVISIONAL COURT FILE NO.: 633/10
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: RADEK CHRABALOWSKI Plaintiff/Appellant
AND:
BMO NESBITT BURNS INC. Defendant/Respondent
BEFORE: Lederer J.
COUNSEL: Guillermo Schible, for the Plaintiff/Appellant Kristin Taylor, for the Defendant/Respondent
HEARD: April 20, 2011
ENDORSEMENT
1This is a motion to appeal an order of Master Abrams. She refused to allow amendments to the Statement of Claim. To my mind, her analysis was comprehensive and her conclusion correct.
Facts
2On May 14, 2001, the defendant, BMO Nesbitt Burns Inc., hired the plaintiff, Radek Chrabalowsi, as an Investment Advisor. He had previously worked in a similar capacity with another firm. He brought with him approximately $12.5 million in assets under management. On April 19, 2006, the defendant dismissed the plaintiff without cause or notice. The defendant offered to the plaintiff a severance package that provided pay in lieu of notice. The plaintiff rejected the offer. Over the period he worked with the defendant, the plaintiff increased his "book of business". At the time of his dismissal, he had approximately $30,000,000 in assets under management. Three business days after his termination (April 24, 2006), the plaintiff was hired as an Investment Advisor, with a new employer. On April 8, 2008, eight days prior to the expiry of the limitation period, the plaintiff issued a Statement of Claim for wrongful dismissal. He sought reasonable notice of five months, unpaid commissions and bonuses, as well as the amounts due to him under the Employment Standards Act, 2000, S.O. 2000 c. 41. Approximately four years after the termination of his employment with the defendant, the plaintiff sought to amend his claim. In substance, he sought to increase the value of the damages claimed from $120,000 to $720,000. The increase is founded on claims for “moral damages in the manner of dismissal and loss of clientele”.
3These are the amendments the Master refused to allow.
The Limitations Act
4To understand this situation, it is important to remember that the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B prescribes a two-year limitation period for the commencement of actions. It applies to this case. This being so, if the proposed amendments constitute a new cause of action, it would be out of time and could not proceed.
Position of the Parties
5The plaintiff says that: “The proposed amendments are not being used as a cause of action…”. Rather, they represent a clarification of the damages being claimed in respect of the action already commenced. It is said that the plaintiff lost clients as a result of his wrongful dismissal. On this argument, the value of that loss is attributable to his termination and recoverable as damages. The central claim for “moral damages” is based on the proposition that no working notice was provided to the plaintiff; thus, preventing him from preparing to transition and taking his clients with him.
6The defendants do not say that there cannot be an action for the claims the amendments represent. As it is, they raise a new cause of action. It is not referred to in the original claim. The limitation period has now expired. Counsel for the defendant submitted that any claim arising from the loss of clientele could not arise from the contract of employment. It was founded on the allegation of a separate contractual arrangement respecting the right to compete for business. The claim for moral damages is not a separate claim. The damages referred to are those that arose from the alleged loss of clients and this is just an indirect means of raising a claim that cannot be sustained.
Analysis
7The Master accepted the submissions of the defendant; so do I.
Lost Clientele
8The position of the plaintiff depends on the proposition that there is a right, in law, to working notice. In the circumstances of this case, the plaintiff was terminated without prior warning. As pleaded in the Statement of Claim, he received a message indicating that the Assistant Manager of the office where he worked wished to meet with him. They met that day. The plaintiff was advised that his employment was being terminated, without cause. The plaintiff was told to pack his most necessary belongings and was escorted out of the building.
9The plaintiff says that the only purpose in his being terminated in this manner was to allow the defendants, even as he was leaving, to attempt to retain his business and his clients. This may or may not be so, but the issue is whether the possible claim it raises is as a result of the breach of his employment contract. It is not. This is made clear by the decision of the Court of Appeal of Alberta in the case of Merrill Lynch Canada Inc. v. Soost 2010 ABCA 251, [2010] A.J. No. 995. The plaintiff, also an Investment Advisor, was terminated without notice. The defendant asserted that there had been cause. At trial, the judge found that there was substance to some of the grounds for dismissal alleged by the defendant, but not others. He concluded that the defendant had not proved that there was sufficient basis to summarily dismiss the plaintiff. This being so, he was left to determine a reasonable notice period. He assessed this as twelve months and awarded $600,000 on account of lost income over that time. The trial judge went on, having regard to the manner in which the plaintiff was terminated, which he found had a significant detrimental effect on the reputation to the plaintiff and the ability of the plaintiff to keep his old clients and attract new clients. As a result, he awarded a further $1,600,000. The trial judge was satisfied that the defendant knew at the time it hired the plaintiff that, if it purported to terminate him for cause and without notice, the plaintiff would suffer significant damage to his reputation and book of business. This harm would not be compensated for by an award of damages in lieu of notice (see: Soost v. Merrill Lynch Canada Inc. 2009 ABQB 591, [2009] A.J. No. 1126).
10No appeal was made with respect to the award of $600,000 representing pay in lieu of notice. The appeal dealt with the $1,600,000 in what the court referred to as "extra" damages. The court concluded that this award could not stand. In dealing with the right of the employer to dismiss, it said:
No cause whatever is needed for the employee to resign or for the employer to dismiss, and such resignation or dismissal cannot be legally upset (unless a collective agreement or certain federal legislation applies).
However, it is implied in the contract that the party terminating the contract without cause will give notice of reasonable length. All that need be reasonable is the amount of time which it affords. So an employer wishing to dismiss an employee without cause must either give long enough advance notice, or pay salary corresponding to that period of time: cf. Farber v. Royal Tr. Co., 1997 387 (SCC), [1997] 1 S.C.R. 846, 858, 210 N.R. 161, 145 D.L.R. (4th) 1, at p. 8 (para. 23).
I emphasize the word 'or'. No employee has a right to work after dismissal. Every employee can be dismissed at once with no notice and without any grounds. That will not be a breach of the employment contract, provided that the employer gives pay in lieu of notice.
(Merrill Lynch Canada Inc. v. Soost, supra, at paras. 11, 12 and 13)
11In the case I am asked to consider, the plaintiff was terminated without cause. He was offered a severance package. The plaintiff did not accept the offer. His lawsuit, despite the fact that he found employment within three working days, seeks payment in lieu of notice for a period of five months.
12There being no right to continue to work through the notice period, the fact that the plaintiff was not permitted to do so was not a breach of the plaintiff’s employment contract. As in Soost, supra, there can be no claim for damages based on a loss of clientele where the claim is founded on a failure to allow the plaintiff to continue to work. In explaining this situation, the Master relied on a submission of the counsel then acting for the defendant:
Ms. Hall says, and I agree, that there is no legal nexus between the plaintiff’s proposed claim for loss of clientele and that of his original claim that he was wrongfully dismissed and incidentally, lost clients. ‘While it is the same contract as previously pleaded that is claimed in the amendment to have been breached, the contractual provisions and breaches relied on in the amendment are different from the previous pleading and the breaches and resulting damages are different from those previously pleaded. They constitute [a] new [and, here, statute-barred cause] of action’ (see: American Axle & Manufacturing, Inc. v. Durable Release Coaters Ltd., 2010 ONSC 3368, [2010] O.J. 2515 (S.C.J.), at para. 50)
(Reasons of the Master, at para. 8)
13I agree with the Master. The claim for damages arising from lost clientele is founded on a new cause of action which is statute-barred.
14It should be said that the Statement of Claim, as it was originally issued, referenced a loss of clientele on the part of the plaintiff. It said:
As a result of his dismissal, Mr. Chrabalowski has suffered the loss of clientele which he will now have to rebuild.
15This having been said and as the Master noted, no cause of action was advanced and no damages were sought arising from this loss. "The plaintiff could not plead, as he seeks to do, a contractual obligation on the part of the defendant, a breach of that contractual obligation and resulting damages" (see: Reasons of the Master at para. 6).
Moral Damages
16The plaintiff did not plead, in his original Statement of Claim, that the defendant had breached its obligation of good faith and fair dealing towards him at the time of his termination. The Master correctly determined that the plaintiff’s claim for "moral damages" was untenable and should not proceed. It is settled law that moral damages are only available if:
(a) the employer engages in conduct during the course of dismissal that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive; and,
(b) actual damages have resulted from the conduct referred to in (a).
(Honda Canada Inc. v. Keays 2008 SCC 39, [2008] 2 S.C.R. 362 at paras. 57 and 59)
17The essence of the claim is that the plaintiff alleges that the defendant failed to provide him with working notice and, thus, deprived him of the benefits of taking his clients with him to another firm or selling his "book of business". The plaintiff alleged he was entitled to do both, pursuant to an express or implied term of his employment with the defendant. This is just another way of arguing that the plaintiff had a right to continue to work through whatever notice period applied. Again, the Master adopted a submission made by counsel then acting for the defendant:
I agree with Ms. Hall when she says that the plaintiff is thus seeking to accomplish indirectly that which he cannot accomplish directly: use moral damages as a basket clause to encompass what is effectively a new cause of action following the expiration of a limitation period.
(Reasons of the Master, at para. 12)
18I also agree. This is just a collateral means of claiming damages arising from the allegation that the plaintiff lost clientele because he was summarily terminated rather than being allowed to continue to work through his notice.
19Moreover, there is simply no basis to suggest that a claim for moral damages can be based on the defendant, subsequent to the termination, determining that the plaintiff had engaged in misconduct on which a termination for cause could have been based. Moral damages are meant to compensate for the harm inflicted by the manner of dismissal. They do not prevent an employer from defending itself on the basis of investigating whether there is "after-acquired cause".
20Similarly, there can be no claim for moral damages arising out of the defendant’s alleged failure to provide the plaintiff with the statutory minimums to which he was required under the Employment Standards Act, 2000, S.O. 2000, c. 41. The plaintiff received a letter terminating his employment which offered him eleven weeks’ pay in lieu of notice.
21In any event, the plaintiff has not identified any harm (psychological or otherwise) that would be capable of sustaining a claim for moral damages. These are the same findings on which the Master relied (see: Reasons of the Master, at para. 13).
22The appeal is dismissed.
23If the parties are unable to agree as to costs I will consider written submissions on the following basis:
On behalf of the defendant, no later than fifteen days following the release of these reasons. Such submissions are to be no longer than four pages, double-spaced, exclusive of any Costs Outline or Bill of Costs or case law to be provided.
On behalf of the plaintiff, no later than ten days thereafter. Such submissions are to be no longer than four pages, double-spaced, exclusive of any Costs Outline or Bill of Costs or case law to be provided.
On behalf of the defendant, in reply, no later than five days thereafter. Such submissions are to be no longer than two pages, double-spaced.
LEDERER J.
Date: 20110609